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NY Attorney General sues Ex Celsius CEO for fraud at crypto lender

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Today New York Attorney General (NYAG) Letitia James filed a lawsuit against Alex Mashinsky, the former CEO of Celsius Network, the bankrupt cryptocurrency lender. It alleges that Mashinsky repeatedly made false and misleading statements regarding Celsius’s financial position, resulting in New York residents investing money with the company and ultimately incurring losses.

It also states that he failed to register as a securities and commodities dealer.

“As the former CEO of Celsius, Alex Mashinsky promised to lead investors to financial freedom but led them down a path of financial ruin,” said Attorney General James. “The law is clear that making false and unsubstantiated promises and misleading investors is illegal.”

As part of the bankruptcy process, Mashinsky filed a statement that appears to indicate that losses from the May crypto crash were relatively modest at $167 million. Much of the $1.2 billion shortfall happened much earlier in 2020 and 2021. And despite this, the company raised a $690 million Series B funding.

The NY Attorney General has been quite active in the digital assets arena. It notoriously banned Tether from operating in New York and agreed on a settlement with the stablecoin firm regarding misstating the reserve assets that back the stablecoin.

In other news today, the judge in the Celsius bankruptcy ruled that the terms and conditions of the Celsius Earn product effectively meant the assets belonged to Celsius. While that’s bad news for depositors, the terms were pretty clear. It implies that depositors won’t be at the front of the queue for payouts.

As part of the same Mashinsky bankruptcy statement, the former CEO claimed as much. At the time, we wrote, “Mashinsky highlights that the Celsius terms and conditions state that when people hand over cryptocurrency to Celsius, the company can do pretty much whatever it wants with it. And it did.”